Two bidders have sought to buy Florida based Perry Ellis – one group of reported ‘insiders’ connected to management, and then an outside company, Randa. Besides the inherent interest of multi-bidder scenarios for an investor considering appraisal, both sides of this – increasingly chippy – fight have invoked appraisal as part of promoting their bids. It’s a curious development.
The Perry Ellis special committee, in announcing that it found the slightly lower priced management bid to be better invoked appraisal, writing that Randa’s bid would not have appraisal rights – as opposed to the management connected bid, which would. Randa responded that Florida law allows appraisal in insider-related transactions, but not for transactions (like Randa’s bid, according to Randa) that do not involve insiders. What’s odd about invoking appraisal in one’s assertion that a certain bid is better than another is that appraisal generally (and in Florida, does) require that one vote against, or at least not vote for the transaction. In theory, yes, the insider connected bid here carries appraisal rights for those dissatisfied with the deal, as opposed to Randa’s (higher) bid which does not carry appraisal. One might imagine, though, that an investor voting against the lower, management connected bid, would actually cite Randa’s bid as showing a higher value. In effect – the policy reason why the insider bid carries appraisal rights is basically exactly what is occurring: to protect a minority shareholder from having to take a price lower than what a competing bidder would pay. On the other hand, one can readily read the special committee statement as invoking appraisal in order to demonstrate that it considered factors – such as the remedies available to a minority, dissenting shareholder – even beyond the benefit to “yes” voters.
We’ve written before about Florida appraisal, and this deal shows that appraisal is, and remains, a potential remedy outside of Delaware.